If American wants to remain the most technologically advanced nation on the planet, then-President Biden should rejoin the Trans-Pacific Partnership.
Trade creates wealth by permitting each country to specialize in what it does best. U.S. export industries enjoy a labor productivity advantage over import-competing industries exceeding 11 percent. With exports of $2.5 trillion, specialization increases annual U.S. GDP by about $280 billion.
Longer-term, U.S. exporters spend more on R&D than other businesses and include many creative giants like Disney. Profits earned abroad boost domestic R&D and media-content budgets and underpin American leadership and growth.
It’s tough to ponder the modern American economy with Apple, Google, Intel, Facebook, Netflix, and others limited to just the U.S. market because they could not support so many scientists, engineers, and creative artists.
Interruptions to global commerce imposed by COVID-19 illustrated the complexity of global supply chains. For example, best-in-class methods and dominant market shares for the 300 or so components, processes, tools, and chemicals in the semiconductor industry are broadly distributed across the United States, China, Japan, Taiwan, Korea, Australia, India, and several other nations.
Easy international access is required for any one player to thrive. If China, for example, enjoyed substantially better access than the United States because its competitors faced lower tariffs or were positioned to define global product standards, American businesses and workers would lose out.
At the same time, textbook models of free trade assume balanced international commerce, but in normal times, the United States runs about a $700 billion deficit on trade in goods and services.
In part, the United States enjoys global seigniorage.
Central banks around the world hold U.S. dollars and bonds to back up their currencies. The dollar is the currency of choice for many international investors and in transnational commerce. As those needs expand, the United States can print dollars and import goods and services without providing exports in return.
The trade deficit is also caused by the mercantilist practices of China and other nations. Instead of sending Vietnam cars and trucks made in Detroit, Ford has an assembly plant in Vietnam to avoid tariffs on automobiles that range up to 70 percent.
Those lost exports are costing the U.S. dearly in jobs, R&D, and growth.
That’s why President Trump’s America First and Mr. Biden’s Middle-Class trade policy have so much traction, but those are dangerous ideas when carried to the extreme.
Negotiating tougher rules to address state-sponsored enterprises, tariffs, product standards, and the new challenges posed by the digital economy in the manner of the U.S.-Mexico-Canada Free Trade Agreement is smart policy. Balking at trade agreements altogether risks cutting out America.
China captured leads in 5G and solar panel technology by offering firms like Huawei generous subsidies and limiting foreign competitors’ access to its domestic market.
Had the United States permitted Huawei to become a near-monopoly global supplier of 5G by not blocking sales here and persuading the UK, Canada, India, and others, China’s national champion would have been in a position to de facto set global standards for components and software that interface with the internet backbone like routers, and accessories like smartphones, microprocessors, and operating systems.
That would have created obvious opportunities to advantage Chinese businesses over American and other western competitors throughout the telecommunications and semiconductor supply chains.
The modern world trading system was conceived after World War II to be a Peaceable Kingdom, but China has abused trade rules to great advantage. Its trade surplus with the United States is in part responsible for its faster growth and stock of dollars it uses to finance its military, Belt and Road Initiative, and other instruments of soft power.
President Barack Obama conceived of the TPP to contain China and improve U.S. market access in Asia, but Mr. Trump withdrew the United States. Along with Mr. Biden’s disinterest, that leaves the field open to China.
China has formed the Regional Comprehensive Economic Partnership, a more limited arrangement in Asia that only lowers tariffs, and is exploring membership in the TPP. As a member, China could force smaller states to acclimate to its state-directed capitalism through how TPP rules are interpreted and enforced and block American participation.
With China, the TPP would be the world’s largest trading block with about one-third of global GDP and in a position to exercise a high degree of influence over the global rules of commerce. American competitors like Apple, Intel, and Netflix would be left standing in the cold with their noses pressed against the window.
• Peter Morici is an economist and emeritus business professor at the University of Maryland and a national columnist.